Am I More or Less Right?

11.03.2005/Headline/USA Today: “Time Warner Announces 80% Higher Earnings: Company Raises Stock Buyback Goal”

TP: When a so-so company’s stock is in the tank and shareholders are restless and unimpressed with short-term earnings boosts and when the company has cash on hand and when the company has utterly no idea how to invest the cash in anything exciting that will offer a great return that will lift the share price it can buy back a big hunk of its stock which not only lifts the share price but also relieves the company of the crushing burden of having to worry about doing anything imaginative with the money and it also puts wealth in the hands of shareholders who following the precepts of portfolio theory can quit worrying for awhile about the hapless, unimaginative leadership of the buyback company and instead invest the newfound wealth in a firm such as Google or Amgen which always is in need of cash to fund a long list of very cool ideas which probably will result in the creation of … can you believe it … actual underlying and perhaps even sustainable value.

(For those who agree with the above, you’ll find it in PowerPoint here.)

Tom Peters posted this on November 4, 2005, in News.
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